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Income Taxes | 12 Months Ended
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Jan. 01, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of income before provision for income taxes are as follows:
(In thousands) |  | January 1, 2022 |  | January 2, 2021 |  | December 28, 2019
Domestic |  | $ | 26,599 |  |  | $ | 14,132 |  |  | $ | 93 |
Foreign |  | 85,453 |  |  | 59,555 |  |  | 68,829 |
|  | $ | 112,052 |  |  | $ | 73,687 |  |  | $ | 68,922 |
The components of the provision for income taxes are as follows:
(In thousands) |  | January 1, 2022 |  | January 2, 2021 |  | December 28, 2019
Current Provision (Benefit): |  |  |  |  |  |
Federal |  | $ | 2,173 |  |  | $ | 339 |  |  | $ | (264) |
Foreign |  | 25,512 |  |  | 16,800 |  |  | 18,778 |
State |  | 870 |  |  | 667 |  |  | 335 |
|  | 28,555 |  |  | 17,806 |  |  | 18,849 |
Deferred Provision (Benefit): |  |  |  |  |  |
Federal |  | 1,823 |  |  | 2,146 |  |  | (453) |
Foreign |  | (3,430) |  |  | (2,361) |  |  | (1,253) |
State |  | 223 |  |  | 357 |  |  | (785) |
|  | (1,384) |  |  | 142 |  |  | (2,491) |
|  | $ | 27,171 |  |  | $ | 17,948 |  |  | $ | 16,358 |
The Company receives a tax deduction upon the exercise of nonqualified stock options and the vesting of RSUs. The Company recognizes excess income tax benefits and tax deficiencies related to stock-based compensation arrangements as discrete items within the provision for income taxes in the reporting period in which they occur. The Company recognized an income tax benefit of $1,808,000 in 2021, $758,000 in 2020 and $3,754,000 in 2019 in the accompanying consolidated statement of income. The provision for income taxes in the accompanying consolidated statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before provision for income taxes due to the following:
(In thousands) |  | January 1, 2022 |  | January 2, 2021 |  | December 28, 2019
Provision for Income Taxes at Statutory Rate |  | $ | 23,531 |  |  | $ | 15,474 |  |  | $ | 14,474 |
Increases (Decreases) Resulting From: |  |  |  |  |  |
Foreign tax rate differential |  | 2,819 |  |  | 1,891 |  |  | 2,584 |
Nondeductible expenses |  | 1,673 |  |  | 2,117 |  |  | 2,407 |
Excess tax benefit related to stock-based compensation |  | (1,525) |  |  | (661) |  |  | (3,305) |
State income taxes, net of federal income tax |  | 863 |  |  | 807 |  |  | (355) |
U.S. tax cost of foreign earnings |  | 481 |  |  | 599 |  |  | 146 |
Reversal of tax benefit reserves, net |  | (444) |  |  | (730) |  |  | (286) |
Research and development tax credits |  | (454) |  |  | (465) |  |  | (381) |
Change in valuation allowance |  | (31) |  |  | (469) |  |  | 81 |
Other |  | 258 |  |  | (615) |  |  | 993 |
|  | $ | 27,171 |  |  | $ | 17,948 |  |  | $ | 16,358 |
The Company's net deferred tax liability consists of the following:
(In thousands) |  | January 1, 2022 |  | January 2, 2021
Deferred Tax Asset: |  |  |  |
Net operating loss carryforwards |  | $ | 14,162 |  |  | $ | 13,719 |
Lease liabilities |  | 6,393 |  |  | 6,855 |
Inventory basis difference |  | 4,600 |  |  | 4,576 |
Employee compensation |  | 4,368 |  |  | 3,189 |
Reserves and accruals |  | 3,167 |  |  | 3,565 |
Capitalized research expenses |  | 2,349 |  |  | 2,668 |
Foreign, state, and alternative minimum tax credit carryforwards |  | 508 |  |  | 472 |
Allowance for credit losses |  | 420 |  |  | 397 |
Other |  | 48 |  |  | 213 |
Deferred tax asset, gross |  | 36,015 |  |  | 35,654 |
Less: valuation allowance |  | (9,212) |  |  | (9,609) |
Deferred tax asset, net |  | 26,803 |  |  | 26,045 |
Deferred Tax Liability: |  |  |  |
Goodwill and intangible assets |  | (43,780) |  |  | (30,166) |
Fixed asset basis difference |  | (6,009) |  |  | (4,964) |
ROU assets |  | (5,431) |  |  | (5,812) |
Provision for unremitted foreign earnings |  | (559) |  |  | (1,233) |
Other |  | (1,819) |  |  | (1,574) |
Deferred tax liability |  | (57,598) |  |  | (43,749) |
Net deferred tax liability |  | $ | (30,795) |  |  | $ | (17,704) |
Deferred tax assets and liabilities are presented in the accompanying consolidated balance sheet within other assets and long-term deferred income taxes on a net basis by tax jurisdiction. The Company has established valuation allowances related to certain domestic and foreign deferred tax assets on deductible temporary differences, tax losses, and tax credit carryforwards. The valuation allowance at year-end 2021 was $9,212,000, consisting of $190,000 in the United States and $9,022,000 in foreign jurisdictions. The decrease in the valuation allowance in 2021 of $397,000 is related primarily to fluctuations in foreign currency exchange rates and utilization of foreign net operating losses, partially offset by an increase in valuation allowance associated with acquired net operating losses. Compliance with ASC 740 requires the Company to periodically evaluate the necessity of establishing or adjusting a valuation allowance for deferred tax assets depending on whether it is more likely than not that a related tax benefit will be realized in future periods. When assessing the need for a valuation allowance in a tax jurisdiction, the Company evaluates the weight of all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As part of this evaluation, the Company considers its cumulative three-year history of earnings before income taxes, taxable income in prior carryback years, future reversals of existing taxable temporary differences, prudent and feasible tax planning strategies, and expected future results of operations. As of year-end 2021, the Company continued to maintain a valuation allowance in the United States against a portion of its state net operating loss carryforwards due to the uncertainty of future profitability in certain state jurisdictions. As of year-end 2021, the Company maintained valuation allowances in certain foreign jurisdictions because of the uncertainty of future profitability within those foreign jurisdictions. At year-end 2021, the Company had U.S. federal and state net operating loss carryforwards of $2,304,000 and $30,830,000, respectively, and foreign net operating loss carryforwards of $56,537,000. The U.S. federal net operating loss carryforward does not expire. The state net operating loss carryforwards begin to expire in 2024 and a portion does not expire. Of the foreign net operating loss carryforwards, $1,499,000 will expire in the years 2024 through 2041, and the remainder do not expire. As of year-end 2021, the Company also had state disallowed business interest expense carryforwards of $67,000 and foreign tax credits of $368,000, of which $120,000 came from the acquisition of SMH. The disallowed business interest expense carryforward does not expire, and the foreign tax credit carryforward begins to expire in 2024. The utilization of these tax attributes is limited to the Company’s future taxable income, and certain of these tax attributes are subject to an annual limitation as a result of the acquisition of SMH, which constitutes a change of ownership as defined under Internal Revenue Code Section 382. At year-end 2021, the Company had approximately $245,079,000 of unremitted foreign earnings. During 2021, the Company repatriated $116,853,000 of previously taxed foreign earnings to the United States and recognized a foreign exchange gain of $517,000 associated with these earnings. Of the earnings repatriated in 2021, $100,765,000 related to a distribution of shares of a foreign subsidiary. The Company intends to repatriate the distributable reserves of select foreign subsidiaries back to the United States and has recognized $570,000 of net tax expense on the estimated repatriation amount during 2021. Except for these select foreign subsidiaries, the Company intends to indefinitely reinvest $223,035,000 of these earnings of its foreign subsidiaries in order to support the current and future capital needs of their operations, including the repayment of the Company’s foreign debt. The related foreign withholding taxes, which would be required if the Company were to remit these foreign earnings to the United States, would be approximately $4,116,000. The Company operates within multiple tax jurisdictions and could be subject to audit in those jurisdictions. Such audits can involve complex income tax issues, which may require an extended period of time to resolve and may cover multiple years. In management's opinion, adequate provisions for income taxes have been made for all years subject to audit. As of year-end 2021, the Company had a liability of $9,731,000 for unrecognized tax benefits which, if recognized, would reduce the effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(In thousands) |  | January 1, 2022 |  | January 2, 2021
Unrecognized Tax Benefits, Beginning of Year |  | $ | 8,337 |  |  | $ | 8,331 |
Gross Increases—Tax Positions in Prior Periods |  | 2,409 |  |  | 4 |
Gross Decreases—Tax Positions in Prior Periods |  | (2,182) |  |  | (21) |
Gross Increases—Current-period Tax Positions |  | 1,920 |  |  | 1,468 |
Lapses of Statutes of Limitations |  | (649) |  |  | (1,488) |
Currency Translation |  | (104) |  |  | 43 |
Unrecognized Tax Benefits, End of Year |  | $ | 9,731 |  |  | $ | 8,337 |
A portion of the unrecognized tax benefits generated in 2021 is offset by deferred tax assets in the accompanying consolidated balance sheet. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company has accrued $1,704,000 at year-end 2021 and $1,600,000 at year-end 2020 for the potential payment of interest and penalties. The interest and penalties included in the accompanying consolidated statement of income was a benefit of $129,000 in 2021 and $145,000 in 2020. The Company is currently under audit in one of its foreign tax jurisdictions. During 2021, the Company finalized its examination with the Internal Revenue Service for the tax years 2017 and 2018 with no material adjustments. It is reasonably possible that over the next fiscal year the amount of liability for unrecognized tax benefits may be reduced by up to $1,367,000 primarily from the expiration of tax statutes of limitations. The Company remains subject to U.S. federal income tax examinations for the tax years 2019 through 2021, and to non-U.S. income tax examinations for the tax years 2008 through 2021. In addition, the Company remains subject to state and local income tax examinations in the United States for the tax years 2003 through 2021.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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